Renowned author Robin Jeffrey has written extensively about India over the past three decades. An avid Kerala watcher, Jeffrey's stellar book The Decline of Nayar Dominance had brought him closer to the state's people, politics and language — he can read and write in Malayalam, and he still keeps a close watch on its political developments.

He isn't surprised by the Congress-led UDF government declaring that it will not implement its own party's proposed retail reform — chief minister Oommen Chandy is the only Congress chief minister to say his state isn't ready to implement foreign direct investment (FDI) in multi-brand retail.

A consumerist society, Kerala has a good number of active providers of consumer's needs, notes Jeffrey. "They could say, 'Why do we need foreign investment to do what we are already doing?' One can then ask, 'Why does one want Walmart-style operations if they bring no local advantage?" asks Jeffrey.

Of course, God's Own Country has in plenty what Jeffrey calls "active providers of consumer's needs", agrees economist KP Kannan. "The state has a large retail sector... it has a strong service-sector economy. The retail chain is a strong one unlike in most other parts of India. In fact, no distinction can be made between urban and rural areas. You find high-class retail outlets even in the rural areas of the state," he says.

Several retail experts, too, have said that Kerala is much ahead of the curve in following global trends in retail. For instance, the five-storied, five lakh sq ft showroom owned by textile retailer Emmanuval Silks in Kochi can park 1,000 cars at a time; it also boasts a 5,000 sq ft children's play area, a 4,500 sq ft food court, doctor and nurse on call, huge conference halls and other world-class amenities.

Sure, the local advantage question will haunt any new foreign entrant if they are ever to make an entry, says Kannan. The Centre has proposed that foreign multi-brand retail players can hold up to 51% in a local arm.

Political Muscle

More importantly, these "active providers" are politically influential. "No government can afford to antagonise them. They are very powerful," says TM Thomas Isaac, former finance minister and CPM leader. Clearly, the Congress party, which at the Centre wants to go ahead with retail-sector reforms "cannot afford to alienate them", Isaac adds. And he is right.

Immediately after commerce minister Anand Sharma said that all Congress-ruled states, including Kerala, would implement FDI in multi-brand retail, Chandy clarified that his government was opposed to the idea. He was quoted as saying in the media: "Lakhs of people are engaged in retail business in the state. The FDI will affect them. Second, even in the villages we have a very good retail system. So, at this stage, we don't think FDI in retail will be a good step in Kerala."

The president of Kerala Vyapari Vyavasayi Ekopana Samithi, T Naseeruddin, says the chief minister had to make that "bold decision" after he and a few Congress leaders opposed the move. "In fact, the majority of the Congress party doesn't back that decision," he claimed, adding that his organisation, which comprises 7.5 lakh small traders of Kerala, will fight any effort to impose "the Centre's diktats".

"But we don't have to. Our politicians know what is good for the state," he contends. Vyapari Vyavasayi Ekopana Samithi's members belong to all political parties, including the Congress and the Left; The CPM, however, has floated a parallel union in the state, Vyapari Vyavasayi Samithi, which is a much smaller organisation.

Kerala as Catalyst?

Naseeruddin says he expects more Congress-ruled states to now join Kerala in opposing FDI in multi-brand retail. "Besides factors such as high-quality retail experience and powerful trader lobbies, there is also a cultural and social context to Chandy's decision," says a Kannur-based Congress leader who didn't wish to be identified. "In Kerala, it is difficult to implement decision without public endorsement. Besides, even Congress leaders are socialist by nature," he adds.

Professor Kannan also dwells at length on "the importance of public opinion" in Kerala. "Unlike many other states, politicians of the state are under the constant scrutiny of the media. No politician would want to implement a policy just because the party leadership had told him," Kannan says. He claims that there is a genuine fear among the state's small traders that big foreign players will destroy them. "In fact, that is the global experience, be it in the US or in Europe where retail biggies will have the power to fix the price," he notes.

A Question of Expediency

Jeffrey makes a point: "Add to [other reasons] the fact that Kerala politics are always finely balanced, that the Chandy coalition's majority is tiny and that the CPM will run very hard on this issue. Would the CM not risk his government if he were to embrace foreign entry?"

The Congress leader agrees. He adds that the whole state is a big supermarket on either sides of its eight national highways and 77 state highways. "We have enough and more of retail operations," he says.

"Besides, there are no studies that show that global retail chains have benefited any country. And the people of the state seem to be well aware of this fact," argues Kannan. Adds Isaac: "Be it the Congress or the Left, there is a Leftist hegemony in the state. That still works." The Congress leader shares his views.

For his part, Naseeruddin says his organisation is powerful enough to stall FDI in multi-brand retail in the state. "We can't be ignored," he avers. Looks like he is right.